Summary
In Kraft, the court held that a mere 10 percent difference between the actual value and quoted value of the tavern made the seller's estimate "substantially true."
Summary of this case from CMFG Life Ins. Co. v. RBS Sec. Inc.Opinion
September 6, 1962 —
October 2, 1962.
APPEAL from a judgment of the circuit court for Dodge county: HENRY G. GERGEN, JR., Circuit Judge. Affirmed.
The cause was submitted for the appellant on the brief of Swan, Strub Woodworth, and for the respondent on the brief of Lueck Skupniewitz, all of Beaver Dam.
Action by plaintiff Gust E. Kraft to recover the sum of $4,000 and interest thereon alleged to be due plaintiff from the sale of certain personal property to defendant Lawrence Wodill. Defendant counterclaimed and alleged that: (1) Plaintiff fraudulently represented to defendant that the personal property was worth $5,500 and was in good condition; (2) its actual value did not exceed $1,500 and it was in poor condition; and (3) defendant had purchased same for $5,500 relying on the truth of plaintiff's representations.
At the time of the sale on April 25, 1960, and for some years prior thereto, plaintiff Kraft was a tavern operator in the city of Beaver Dam. In 1958, Kraft purchased a second tavern business located on the same street as his own tavern. He operated this second tavern through agents under the name of "Peek-Inn." The tavern building was owned by a Mrs. Weinke. At the time of his purchase, Kraft took over the lease which the prior owner had obtained from Mrs. Weinke. Wodill, approximately fifty-three years of age, had resided in Columbus where he had been employed in the Borden dried-milk plant for fifteen years. In April, 1960, he was on an extended layoff. He had recently worked mornings in a Columbus tavern cleaning up the premises. On his adverse examination before trial he admitted that he had also tended bar in this tavern for about four weeks. Wodill and his wife had known Kraft for a period of four to six years as a result of their patronizing Kraft's tavern occasionally.
On or about April 1, 1960, Wodill and his wife stopped at Kraft's tavern one evening, and Kraft mentioned that the Peek-Inn tavern was for sale. Wodill testified that Kraft placed the selling price at $5,500, and represented that it was worth $5,500 and that the personal property was in "A-1 condition." One week after this first conversation, Kraft took Mr. and Mrs. Wodill, their adult son, and the son's wife over to the Peek-Inn tavern. The four Wodills testified that Kraft again made the statement that "it" was worth $5,500 and was in good condition. Wodill also testified that in purchasing the tavern's personal property, he relied upon these representations and those made by Kraft one week earlier.
The Wodills remained in the tavern for about twenty minutes but made no close inspection of the personal property. They did not go into the basement where the walk-in beer cooler was located. Wodill had brought along certain stock certificates and bonds which he exhibited to Kraft to show that he could pay the $5,500 purchase price. Kraft stated that he would not accept them in payment because he knew nothing about stocks and bonds. He offered to give Wodill until January 2, 1961, to pay the major part of the purchase price with any balance to bear interest. One Meisenberg, who operated the Peek-Inn tavern for Kraft, testified that Wodill visited the tavern and looked over the walk-in cooler in the basement before he bought the business. At that time Wodill told Meisenberg, "If I buy it [referring to the tavern business], it will be a living."
On April 25, 1960, Wodill saw Mrs. Weinke, and arranged to take over Kraft's lease. On this same day Wodill and Kraft went to the city clerk's office in Beaver Dam where Wodill applied for a Class "B" liquor and beer license to operate the tavern for the period May 2d through June 30, 1960. At the same time, Kraft agreed to surrender his license for the Peek-Inn tavern so that the new license could be issued to Wodill. They also went to the utility offices so that Wodill would have electricity and telephone service when the tavern business was transferred. Wodill made the necessary deposits. Next they went to the law office of Lueck Skupniewitz and had Attorney Arthur Lueck draft a sales agreement covering the sale of the personal property in the tavern building including all fixtures and inventory. Wodill agreed to pay Kraft $5,500 under the terms of the sales agreement as follows: $1,500 immediately and the remaining $4,000 on January 2, 1961, with interest at five percent thereon from April 25, 1960. Wodill was to take possession of the tavern building at midnight, April 30, 1960. The Beaver Dam common council approved Wodill's application for a Class "B" license which was duly issued to him.
Wodill and members of his family testified to the poor state of repair of certain fixtures such as the 13 barstools and the walk-in cooler. Nevertheless, Wodill has continued to use these in the tavern with little expenditure for repairs. Kraft testified that all the fixtures served their purpose and worked properly.
Wodill failed to pay the $4,000 balance with interest which became due on January 2, 1961; Kraft then commenced the instant action to recover same. The issue raised by Wodill's counterclaim was tried to the court without a jury. At the close of the trial, the court entered its findings of fact and conclusions of law. Among these findings were the following:
"8. Prior to the execution of said sales agreement [of April 25, 1960] plaintiff represented to defendant that such tavern business was for sale, that it was worth $5,500, and that the fixtures and equipment were in good condition, and by intendment included the right of the buyer to apply for and obtain a Class "B" liquor license for such location to be issued by the proper Beaver Dam authorities.
"9. Such representations were substantially true; plaintiff's books show the historical value of the business to be between $5,000 and $5,500, which includes the value of a Class "B" liquor license; such representation as to condition related to serviceability of the equipment and fixtures, and ordinary inspection thereof would have disclosed the same to be secondhand and antiquated and less efficient than when new, but the same were in working condition.
"10. Prior to the making of said sales agreement the defendant knew, or in the exercise of ordinary care should have known, that such fixtures and equipment were secondhand and antiquated and that they were in good condition so far as serviceability and efficiency was concerned.
"11. The plaintiff did not make any misrepresentations to defendant concerning the value nor condition of the property sold and purchased at or before the making of such sales agreement."
Judgment was entered November 6, 1961, awarding plaintiff Kraft $4,447.85, and dismissing defendant Wodill's counterclaim upon its merits. From this judgment Wodill has appealed.
We are satisfied on this appeal that defendant Wodill has not successfully attacked the trial court's findings of fact with respect to the condition of the tavern fixtures which he purchased. The facts are clear that Kraft gave Wodill every opportunity to inspect. Wodill and three other adult members of his family visited the tavern in which the fixtures were located about two weeks before his purchase of the tavern business. Wodill failed to inspect the fixtures on that occasion. A casual inspection would have disclosed that they were secondhand and somewhat the worse for wear. Furthermore, Meisenberg testified that sometime before Wodill's purchase, he again came to the tavern and went down into the basement where the walk-in cooler was located. Ordinary inspection would have disclosed the true condition of these fixtures as the trial court pointed out in its findings. In this regard, we consider particularly apropos the following statement made by Mr. Justice GEHL, speaking for this court, in W. H. Hobbs Supply Co. v. Ernst (1955), 270 Wis. 166, 170, 70 N.W.2d 615:
"It is true that ordinarily one to whom a positive, distinct, and definite representation has been made is entitled to rely on such representation and need not make further inquiry concerning the particular facts involved. It is just as true, however, that one may not under all circumstances blindly act on a statement in disregard of an opportunity to learn the truth when by the exercise of ordinary attention he would have learned it. Plantikow v. Wolk, 190 Wis. 218, 208 N.W. 922; Acme Chair M.C. Co. v. Northern C. Co. 209 Wis. 8, 243 N.W. 415, 244 N.W. 582; In re Acme Brass Metal Works, 225 Wis. 74, 272 N.W. 356."
Even if we overlook Wodill's failure to examine the fixtures we are met with the trial court's finding that they worked properly and served the purpose for which they were installed. Thus plaintiff's representations, as to their condition, were substantially true, and the trial court so held.
Kraft's representation that the assets sold to Wodill were worth $5,500 presents a closer question. We are first confronted with the thorny question, When is a representation of value deemed in law a statement of fact as opposed to a mere expression of opinion, insufficient to support a cause of action for fraud and deceit? The most-satisfactory test was stated by Mr. Justice (later Chief Justice) ROSENBERRY in Miranovitz v. Gee (1916), 163 Wis. 246, 255, 157 N.W. 790, as follows:
"A study of the cases suggests the thought that, in the absence of an express intent to defraud, the determination of whether or not certain representations are statements of fact or of opinion depends upon whether or not the person to whom the representations are made may, under all the facts and circumstances of the case, including such person's capacity or want of capacity, rely upon them. Where the person to whom they are made may rely upon them they are held to be statements of fact; where the person to whom they are made may not rely upon them, without being guilty of a want of ordinary care and prudence, they are denominated opinions."
Kraft had operated taverns in three other localities before coming to Beaver Dam in 1952. By April, 1960, he had operated at least five taverns, two of which were in Beaver Dam. We may reasonably infer that he purchased tavern assets in connection with each of these five entries into the tavern business and sold tavern assets at three different times before coming to Beaver Dam. Thus his familiarity with the tavern business and the worth of such businesses was much superior to that of Wodill. Therefore we conclude that Kraft's statement, that the assets of the Peek-Inn tavern were worth $5,500, was a statement of fact, not one of opinion.
Wodill contends that the only assets he purchased from Kraft were the fixtures and inventory. He bases this contention on the following grounds: (1) The sales agreement mentions no other assets; and (2) a Class "B" liquor license is not assignable. The great weight of the evidence, however, is to the effect that Wodill was buying a tavern business and not merely physical assets. For example, Wodill's testimony, regarding his first conversation with Kraft, included the following question and answer:
" Q. What was said? A. Well, he said he had a tavern to sell, and he said that me and my wife was out of work now, we would make a nice couple to run it, and it was worth $5,500, or more, and it was in perfect A-1 condition to go ahead with things."
Wodill also admitted that when he signed the sales agreement at Attorney Lueck's office he believed he would have the right to apply for a Class "B" liquor license. Furthermore, on May 3, 1960, Kraft noted the sale of "my tavern" and listed the address of the Peek-Inn tavern on a form issued by the Wisconsin department of taxation, in connection with the sale of the tavern's inventory of alcoholic beverages, and signed by both parties. The acts of the parties on April 25, 1960, afford further corroboration: Kraft helped Wodill take over the tavern lease, apply for a two months' liquor license covering the Peek-Inn premises, and secure telephone service and electricity for the premises.
The parol-evidence rule would not bar evidence that Kraft gave additional consideration, besides the transfer of fixtures and inventory, for the $5,500 purchase price. Morn v. Schalk (1961), 14 Wis.2d 307, 314, 111 N.W.2d 80. This additional consideration was Kraft's surrender both his Class "B" liquor license, two months before it expired, and his lease so as to enable Wodill to be substituted as a liquor licensee and the lessee of the premises. The evidence discloses that the maximum number of Class "B" licenses, authorized by the Beaver Dam common council, were outstanding on April 25, 1960. Therefore, a person, such as Wodill, could not enter the tavern business in that city without arranging for a licensee, such as Kraft, to surrender his license. Thus, while Kraft's Class "B" license was not assignable, his surrender thereof in favor of Wodill was a valuable consideration to Wodill for which Kraft was entitled to be paid.
This brings us to the final question of whether the trial court's findings of fact are against the great weight and clear preponderance of the evidence. The trial court found that the tavern business was historically worth between $5,000 and $5,500, and that Kraft did not misrepresent its value. Kraft paid the former owner of the Peek-Inn tavern $4,000 for the business in 1958. Kraft testified that he spent approximately $1,500 thereafter to improve and redecorate the premises and add to the fixtures. His income-tax returns indicate that this figure was $1,719. The city assessor testified that, using a basis of 54 percent of true value, he assessed the fixtures at $700 for the year 1958. While this was a doomage assessment, it was computed by taking the value of the front and back bars, as if new, and then depreciating them. On the basis of this assessment, the actual value of the fixtures at that time was approximately $1,296. Kraft testified that the market value of the inventory transferred to Wodill was slightly in excess of $200.
One of Wodill's witnesses put the market value of the fixtures and inventory at $1,070. Two witnesses testified concerning the market value of Class "B" liquor licenses in Beaver Dam. One placed the value at $3,500 and the other at only $500. Wodill's 1960 income-tax return discloses that he had a net income of $4,263.98 from the tavern during the last eight months of that year. On trial he admitted that he was making a living by operating the tavern. Thus there is competent evidence to support a finding that the fixtures and inventory were worth approximately $1,500 and Kraft's surrendering his license in Wodill's favor was worth $3,500, making a total value of $5,000. Moreover, Kraft's testimony showing that his investment in the business was about $5,500 or $5,719 is also competent evidence value.
It is our considered judgment that an action for fraud should not be grounded upon a representation of value which includes intangible assets, such as the surrender of a liquor license, if the evidence shows that the representation is substantially true — absent proof of intent to defraud or mislead on the part of the person making the representation. We deem proof of an actual value of $5,000 sufficient to render Kraft's representation of the value as $5,500 substantially true. Therefore, we conclude that the trial court's findings of fact are not against the great weight and clear preponderance of the evidence.
By the Court. — Judgment affirmed.